US judge says securities law applies to ICO
The crypto market isn't having a great day, especially Ethereum, which is down 7% to $182 after falling as low as $176. That's a long way from $1400 back in January.
One of the reasons for the fall is that a New York judge ruled today that a case can go to trial on what sounds like a very obvious scam-coin. The defendant tried to argue that since what he was selling was a currency, not a security, that securities law doesn't apply.
The judge didn't pull any punches in his ruling:
"Per the indictment, no diamonds or real estate, or any coins, tokens, or currency of any imaginable sort, ever existed-- despite promises made to investors to the contrary," District Judge Raymond Dearie said in his ruling. "Simply labeling an investment opportunity as a 'virtual currency' or 'cryptocurrency' does not transform an investment contract -- a security -- into a currency."
I have a feeling that's not the last time we're going to be hearing that in the year ahead. ICOs raised about $18.7 billion this year and I'd wager than 90% of them are underwater.
Two things:
1) 2019 is going to be a banner year for securities lawyers in crypto
2) We're going to be seeing a lot of these kinds of stories